Resilient Singapore banks will falter in second half: Fitch

Signs point to an earnings and asset quality meltdown well into 2013.

With global trade faltering and bruising the Singapore GDP in Q212, prospects in the third and fourth quarters are gloomy and will possibly hit Singapore banks which until now have managed to stay relatively afloat, said Fitch Ratings in its new special report titled "Asia-Pacific Banks: Growing Caution".

Here's more from Fitch:

For Singapore, falling global trade contributed to its GDP contracting by 1.1% in Q212 against the previous quarter, and the economic outlook remains challenging. This backdrop means that Singapore banks are unlikely to sustain their broadly steady performance into H212 and possibly 2013, with a likely deterioration in earnings and asset quality.

Nonetheless, the banks‟ credit fundamentals are supported by strong core capital, overall profitability levels, and funding franchise strengths, which are among the reasons for their resilience through various cycles. A longer-term theme that could exert downward rating pressure is regionalisation, especially into fast-growing emerging markets, although strong balance-sheet qualities and prudent execution continue to be mitigating factors. Continuing deposit gathering and slower US dollardenominated asset growth have gradually addressed the tight funding position which arose from the particularly strong one-off opportunistic growth in 2010-2011.